“We are delighted with the proposals to provide employers with training tax credits for those yet to attain level two qualifications – the compensation levels for small businesses look particularly attractive. This should bring significant long-run improvements to productivity, employability and sustainable employment,” he said.

Philpott added: “Given the disappointing performance of Individual Learning Accounts (ILAs), we are delighted that employers are to be consulted with on the training credit proposals. However, the institute believes that these should initially be introduced as a temporary rather than a permanent measure so that their net impact can be evaluated. The obvious risk is that tax credits of this kind will simply subsidise investment in training that would be undertaken anyway in the long run. Even so the credits can still be justified in the short-medium run in order to help prevent skill shortages once the economy starts to recover.”

Philpott concludes: “With claimant unemployment set to rise above one million next year, help for the jobless that aids their long-term employability must be a priority. The lesson of past recessions is that failure to respond to higher joblessness in this way during downturns can damage the underlying flexibility of the jobs market. We are therefore pleased that the Job Transition Service will be strengthened for those affected by redundancy.”